There’s always market pessimists to tell you “I told you so.”
‘Permabear’ is a term used for pundits like Societe Generale’s Albert Edwards or newsletter writer Marc Faber who predict market calamity on a weekly or monthly basis without respect to recent market activity.
Permabears are really only the tip of the iceberg, though. The number of pundits who are pessimistic 60 or 80 per cent of the time is far larger than the count of devout permabears.
The end result is that there is never a shortage of dramatic calls for catastrophe so when anything truly bad happens in markets, business TV will find someone to gloatingly announce: “I told you so, but you wouldn’t listen.”
The Financial Times’ (free to read with registration) Alphaville site discussed this phenomenon in “The hunt for the next Nostradamus.”
“To state the obvious: for every buyer there must be a seller. Wild views about future market events, long or short, should be treated with the same scrutiny. Claims that Tesla is going to $4,000, or the Fed’s quantitative easing program is going to cause hyper-inflation, should be judged on their merits, not on the extent to which they tap into fears over another crisis… Brave, contrarian predictions are supposed to lean against the kind of herd mentality that drives exuberant valuations. Think Templeton during the Nasdaq bubble for instance. But perhaps the bubble is now in predicting the next systemic crisis, rather than assuming everything will be OK.”
As Alphaville points out, this doesn’t mean investors can always ignore pessimism. New short positions put in place by famed fund manager Jim Chanos, for example, are always worth further research. It is a key point that Mr. Chanos has been correctly bearish numerous times on many short trades, not just once. As a foreign exchange trader once told me, “It’s easy to be bearish, you have to be bearish and make money.”
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Savaria Corp. (SIS-T). This stock appears on the positive breakouts list (stocks with positive price momentum). The company has an attractive growth track record, which is anticipated to continue. Revenue is forecast to rise 55 per cent year-over-year in 2018 and expand 45 per cent year-over-year the following year. This growth stock is trading at a reasonable valuation, in-line with its historical average multiple. Laval, Que.-based Savaria is a manufacturer and provider of accessibility equipment such as stairlifts, wheelchair lifts, ceiling lifts and elevators. In terms of geographic revenue breakdown, in 2017, 59 per cent of the company’s revenue was from the U.S., 34 per cent was from Canada, with the balance from other regions. Jennifer Dowty reports (for subscribers).
AutoCanada Inc. (ACQ-T). If AutoCanada Inc.’s 27-per-cent decline on Friday appeared shocking, spare a thought for long-term investors who have been riding an 87-per-cent decline in the company’s share price over the past four years. Then push aside your sympathy and consider buying this nose-diver, because its fortunes can change in a blink. AutoCanada is an Edmonton-based car retailer that operates through 63 dealerships across Canada and, following its recent $110-million acquisition of Grossinger Auto Group, in Illinois. David Milstead reports (for subscribers).
The Rundown
Wealthsimple launching zero-commission trading platform
Wealthsimple Inc., Canada’s largest robo-adviser, is infiltrating the discount brokerage business with the launch of a new trading platform that will allow investors to buy, sell and track stocks and exchange-traded funds with zero trading commissions. The online portfolio manager – which manages more than $2.5-billion in assets and is predominately owned by investment giant Power Financial Corp. – is naming the platform Wealthsimple Trade. It’s a mobile app that will provide users access to unlimited zero-commission trades of more than 8,000 publicly traded stocks and ETFs listed on major Canadian and U.S exchanges. Clare O’Hara reports.
Canadian stocks at risk from emerging-market turmoil if it intensifies beyond Turkey
The recent volatility in emerging-market equities provides a very real risk to Canadian equity portfolios if it intensifies beyond Turkey, in light of the historically close relationship between the S&P/TSX Composite and the MSCI Emerging Markets Index. This is particularly true for investors in the energy sector and the oil price will be a key market indicator in the coming weeks. Scott Barlow takes a look at a chart that illustrates this link.
How a U.S. dollar debt binge can lead to a ‘vicious cycle’
A handful of emerging markets has gorged on U.S. dollar debt over the past decade – a situation that could lead to a “vicious cycle” for borrowers as the greenback strengthens, a new research note says. Turkey is especially exposed, where non-bank borrowers – a broad group including government, households and most corporations – held US$195-billion in debt denominated in U.S. dollars at the end of last year, “or a stunning 23 per cent of [gross domestic product],” according to National Bank Financial. In 2008, such debt amounted to 12.4 per cent of Turkey’s GDP. Matt Lundy looks at the situation.
Marijuana stocks surge on Canopy deal
Canadian marijuana stocks rallied on Wednesday after Constellation Brands announced that it had struck a deal to invest $5-billion in Canopy Growth Corp., boosting investor confidence that the nascent marijuana sector is attractive to blue-chip consumer brands. David Berman reports (for subscribers).
Wall Street embraces cannabis in Canada
An investment banker who routinely talks to beverage and pharmaceutical executives likes to tell a quick story about the current state of the world: Every meeting with CEOs used to start with five minutes of small talk about U.S. President Donald Trump. Now every session starts with a conversation about cannabis. Constellation Brands Inc.'s $5-billion investment in Canopy Growth Corp. is more than just an expanded partnership between the owners of Robert Mondavi wine and the folks who got their start just five years ago growing marijuana in an abandoned chocolate factory in Smith Falls, Ont. This is a defining transaction for an industry, in part because a leading consumer-product company is staking its claim to the recreational marijuana market and in part because Wall Street is now fully embracing cannabis. Andrew Willis gives his view (for subscribers).
Top Links (for subscribers)
‘Canadian banks can withstand a 35% drop in housing prices’
Others (for subscribers)
Thursday’s analyst upgrades and downgrades
Thursday’s Insider Report: Companies insiders are buying and selling
Wednesday’s analyst upgrades and downgrades
Wednesday’s Insider Report: Companies insiders are buying and selling
Others (for everyone)
Buffett’s Berkshire boosts Goldman stake, confirms Apple purchase
U.S. hedge funds bet on retail, tech in Q2 as economy sizzled
Emerging market stocks in bear territory after 20% drop since January
Number Crunchers (for subscribers)
Seeking Canadian wealth creators, with an eye on volatility
Ask Globe Investor
Investors in music and video provider Stingray Digital Group Inc. are hoping the results of its latest acquisition spree with help jazz up the stock price, which has slumped in recent months after a major debt-laden deal. Is this a value play set for a rebound? Brenda Bouw will profile the stock.
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Compiled by Gillian Livingston
Scott Barlow